NMWM09080 - Pay reference periods and elements of pay: payments in respect of absences

Relevant legislation
Time work
Salaried hours work
Unmeasured or output work
Industrial action
Payments in lieu of absence 

Relevant legislation

The legislation that applies to this page is as follows:

  • National Minimum Wage Regulations 2015, regulations 23, 35, 40 & 48

When calculating national minimum wage pay, a worker’s total remuneration (NMWM09050) in a pay reference period is reduced by any money payments paid in respect of periods of absence from work; for example, when they are sick or on holiday (see also NMWM09180) The reductions to be made differ depending on the type of work performed (NMWM07000).

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Time work

Where a worker is performing time work (NMWM07010) any payments made in respect of a worker’s absence from work reduce the worker’s total remuneration when calculating National Minimum Wage pay.

The time the worker is absent should also be taken off the hours worked for National Minimum Wage purposes.

For example 1: A time worker is sick for 2 days and receives sick pay of £40.00 within the pay reference period. Her total remuneration for that pay reference period will be reduced by £40.00 and the hours she is paid for those 2 days will not count towards the hours worked for National Minimum Wage purposes.
For example 2: A hairdresser is a time worker. She is paid £5.80 per hour, and usually works 5 days per week for 6 hours a day (30 hours per week). Her normal weekly pay is therefore £174.00. Her contract specifies she will receive half pay if she is sick.
One week, she is sick for 3 days and is paid £121.80. National Minimum Wage pay for that week is reduced by the payment in respect of absence £52.20.
Hours worked are also reduced by 18 (3 days at 6 hours)

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Salaried hours work

For salaried hours work if a worker is not entitled under their contract to be paid their full salary in respect of absence, any payment they do receive in respect of an absence will reduce the worker’s total remuneration. Similarly, in the same circumstances, the hours will not count as time worked for National Minimum Wage purposes. See (NMWM08000)

For example: A salaried hours worker is only contractually entitled to half pay when absent from work due to sickness. She is sick for one day and her employer pays her £50.00 half pay for that day. As she is entitled to less than the normal proportion of her annual salary because of her absence from work the amount she is paid for that absence must be reduced from her total remuneration for National Minimum Wage purposes. The corresponding hours will not count as hours worked for National Minimum Wage purposes.

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Unmeasured or output work

If a worker is performing unmeasured or output work, any payment for the worker’s absence reduces the worker’s total remuneration, but only where the payment can be specifically linked to the period of absence. If so, then the hours of absence are also reduced from the hours worked for National Minimum Wage purposes.

If a specific payment for the period of absence cannot be established, then the worker’s total remuneration is not reduced. However, if the hours of absence can be identified they do not count towards the hours worked for National Minimum Wage purposes.

For example: A worker is paid £200.00 per 5-day week irrespective of time worked - she is an unmeasured worker. She is sick for 3 days and her employer still pays her £200.
There is no way to identify whether a payment is in respect of sickness absence or not.
National Minimum Wage pay will not be reduced and the time absent will not be included in the hours worked in that week.

Whether the hours worked are reduced depends on whether the hours of absence can be identified.

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Industrial action

Any payment by an employer to a worker in respect of time when he is engaged in taking industrial action, such as striking or working to rule, is reduced from the worker’s total remuneration when calculating National Minimum Wage pay. Hours when a worker is engaged in industrial action will not be counted as time worked for National Minimum Wage purposes

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Payments in lieu of absence

Payments in lieu of absence [such as when a worker receives accumulated holiday pay but does not take any corresponding days off (NMWM09180)] count towards a worker’s total remuneration in the pay reference period in which they are made (NMWM09050). There are no corresponding reductions from either the worker’s total remuneration or their hours worked.